There is no doubt that it is extremely difficult to completely prepare yourself for divorce financially. After all, you are going to go from running one household between yourself and your spouse to running two households. In addition, if both you and your spouse were working outside of the home prior to divorce, your income is also going to decrease. It is very difficult to adjust your life to your post-divorce financial reality. The fact is, that often divorce requires a complete change of standard of living, which can be extremely difficult for the newly divorced.
So, how does one prepare themselves for the financial shock that awaits when a divorce is filed? In the beginning it can be extremely difficult to prepare, because one does not know what debts/obligations he or she will be responsible for during the divorce and whether he or she will be required to pay or will receive support of some kind both during the divorce and after the divorce is final. As a result of this uncertainly, it is understandable that it can be quite difficult to work out a budget and, if you are moving from the marital residence, to determine how much you can afford for alternative housing. In addition, once you or your spouse file for divorce you will have attorney fees to pay that are above and beyond your typical expenditures. The best way to make sure you don’t get in over your head to to be very conservative regarding what you can afford. Remember, even if you are entitled to support or your spouse is ordered by the Court to pay a particular bill, that doesn’t always mean that your spouse will follow the Court’s order.
Prior to the filing of a divorce, a budget can be a very useful tool. Even if you have not used a budget in the past, it is a good idea to form a budget to determine what changes, if any, you will need to make in your spending. For example, perhaps you will cancel HBO or cable services, downgrade your cellular phone plan or cancel a gym membership that you don’t use often. Be realistic about what you were spending before and whether you can afford to continue the same spending now that your divorce has been filed. Can you continue to eat out once a week? Are you able to afford the maintenance on a luxury car or would you be better off selling your vehicle (after discussion with your divorce attorney) and buying a less expensive vehicle that will require less maintenance and achieve higher gas mileage? Do you need to update your resume to start looking for a better-paying job or get a second job now that you will be on your own financially?
If you have children, think about whether it is appropriate to discuss the upcoming financial change with them. Of course, if you have a 2 year-old it’s not going to necessary. But, if you have a 16 year-old daughter who wants designer clothing and a car it might be necessary to sit her down and explain that there is going to be a budget moving forward and that based upon the new family dynamics that there may be some changes regarding spending in the household.
Finally, since a divorce is a major life change, there are a lot of financial documents that should be updated. Make sure you review your retirement fund beneficiary designations, any payable on death bank account designations and life insurance beneficiaries. It is also a good time to review your estate planning documents to determine whether you need a new will and/or trust. As always, prior to making these changes in the event that your divorce is pending, it is a good idea to consult with your divorce attorney.
If you would like to schedule an appointment to meet with a divorce attorney at Halcomb Singler, LLP’s Carmel, Indiana office, call us at (317) 575-8222.